Interpublic Misses 2Q Earnings Estimates

The Interpublic Group of Companies Inc (IPG) reported second quarter 2013 net income of $79.9 million or 18 cents per share versus a net income of $99.0 million or 22 cents in the year-ago quarter. Reported earnings missed the Zacks Consensus Estimate of 21 cents.

Revenues

Revenues increased 2.4% year over year to $1,756.2 million in second quarter 2013. The quarterly revenues marginally missed the Zacks Consensus Estimate of $1,757 million.

Organic revenues increased 2.2% in the reported quarter. Foreign currency translations had a negative impact of 1.0%, partially offset by a 1.2% contribution from acquisitions.

Margin

Operating income in the second quarter of 2013 was $174.8 million versus $176.4 million in the year-ago quarter. Operating margin in the reported quarter was slightly down (+10.0%) compared with the year-earlier quarter (+10.3%) as operating expenses went up 2.7% to $1,581.4 million. During the reported quarter, salaries and related expense increased 2.9% and office and general expenses were up of 2.4%.

Balance Sheet

As of Jun 30, 2013, the company’s cash and cash equivalents and marketable securities amounted to $1.62 billion, compared with $1.51 billion in the year-ago period. Total debt was $2.26 billion as of Jun 30, 2013 compared with $2.45 billion as on Dec 31, 2012

Subsequent to the end of the quarter, the company redeemed $600 million of its 10.0% senior notes due 2017.

Share Repurchase Program/ Dividend

During second quarter 2013, the company repurchased 7.5 million shares for $104.8 million, bringing its tally for first half of the year to 13.7 million shares for an aggregate cost of $180.6 million. Dividends paid during the quarter aggregated 7.5 cents per share totaling $31.7 million.

Outlook

Interpublic aims to improve its top-line performance with a continuous focus on organic and inorganic growth, and remaining active on share repurchase and dividend payments. Moreover, its commitment toward cost-control initiatives is likely to help the company drive significant growth in the upcoming years. The company expects 2% -3% organic revenue growth and 50 basis points of margin improvement in 2013. Digital capabilities across its portfolio are expected to be strong with increasing presence in high-growth emerging markets at all major networks.

Interpublic currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look in the industry include Publicis Groupe SA. (PUBGY) with a Zacks Rank #1 (Strong Buy), and AirMedia Group Inc. (AMCN) and Harte-Hanks Inc (HHS), both carrying a Zacks Rank #2 (Buy).